5 Bottom-Up Bargains


Roger Conrad Image Roger Conrad Founder and Chief Editor, Capitalist Times

It's been quite a bull market run over the past four years, even though it hasn't felt much like a bull run. By looking at specific companies, you can still find value in some of the top sectors moving forward, writes Roger Conrad of Personal Finance.

By the end of the 1990s, chasing growth stocks’ momentum was many investors’ strategy of choice. Companies with reliable revenue and low debt had enjoyed their best run in history. But by that time, few paid attention to dividends or value, which had been popular early in the decade when fear rather than greed was the dominant market emotion.

The good news is, we’re about as far away from that kind of bubble as is possible. There’s still value to be had in many corners, but after nearly four years of good times, you won’t find it unless you take a bottom-up approach—i.e., scrutinize companies’ underlying busi­nesses on their own merits.

The best values are always in unloved sectors that investors have abandoned because they look bad from 30,000 feet. Sector affinity and aversion have become particularly pro­nounced in recent years, as exchange traded funds have proliferated. Stocks in a sector get bid up and sold off in unison to a much greater extent than was possible in the past.

One sector that’s taking hits now is energy, the subject of our second article. But I see many positive trends in energy, which is why I’m adding a new energy company to the Income Portfolio: super oil Total (TOT).

Energy has been in an uptrend since 1998, when oil prices bottomed at less than $10 a barrel and natural gas last sold for less than a buck per million British Thermal Units.